How to Self-insure

After Hurricane Katrina,  homeowners who had being paying insurance premiums from the moment they moved into their homes discovered one of the cute tricks of Insurance companies; they don’t pay. 

Insurance companies are unbelievably lucrative because they don’t pay.  No matter what you think you have insured against, no matter how many years you have paid the premiums, you are not going to recover your full loss.  There’s always some fine print, some ‘average’ clause, some exception.

In Jamaica we learned this in 1988, right after Gilbert Hurricane.

Imagine, people paying Insurance premiums from 1952. Every year, no claim.  Then, in 1988, Gilbert stomps through Jamaica, and people who have suffered damange race to their assurers, only to learn that;

1) You were under Insured!
2) There’s an Average Clause!
3) You weren’t covered for…!

Premiums paid for over twenty five years; for nothing.

Imagine, for twenty five years, every year, $5,000.00 is paid. $120,000.
Damage is $50,000.
The Insurance company, who has eaten $120,000 of your money, tells you…

1) You paid premiums on a house valued at X but it’s really valued at X + 2 so
you are under insured and we will pay you only 40% of your damage.

2) You only suffered 35% damage and so we will only pay you 35% of your
claim.

3) Your damage was caused by a tree falling on your house and you are not
covered for trees falling on your house.

(I am not making this up, remember in New Orleans, most claims were not paid because the homeowners were covered for ‘hurricane’ not ‘flood’.)

In 1989 many people began paying Insurance Premiums into their Bank accounts.  In 1995 there was an Earthquake. (I call it ‘Flex’ as it isn’t fair hurricanes get names and Earthquakes don’t).

People who had paid money into their Bank Accounts did a simple withdraw or took a loan using the savings as collateral.  Those who had Insurance learned…

1) You were under Insured!
2) There’s an Average Clause!
3) You weren’t covered for…!

How to Self Insure

Pretend you are going to take Insurance and have various companies come out and examine your property, make assessments, explain coverage, set premiums, etc.  Do not pay them. Pay the premiums into an interest bearing account at a bank.  Just as you would pay your premium without fail, make your deposit.  Put in extra when you can, and watch the money grow.

Every year or so, let Insurance Agents waste their time doing assesments and setting value and premiums, and adjust your deposits accordingly.

Never miss a deposit, never touch the money until you have more than the value of your house saved.

Once your deposit is greater than the value of your house you can use the ‘excess’  as you desire.